SUPPORT AGREEMENT
THIS MEMORANDUM OF AGREEMENT made as of the 30th day of June, 1998.
B E T W E E N:
APPLIED CELLULAR TECHNOLOGY, INC., a Missouri corporation
(hereinafter called "Applied")
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COMMSTAR LTD., an Ontario corporation
(hereinafter called the "Corporation")
AND WHEREAS pursuant to an arrangement (the "Arrangement") effected by
articles of arrangement to be filed pursuant to the Business Corporations Act
(Ontario) (the "OBCA"), all of the issued and outstanding common shares in the
capital of the Corporation are to be exchanged, for either common stock in the
capital of Applied or exchangeable non-voting shares in the capital of the
Corporation (the "Exchangeable Shares");
AND WHEREAS the aforesaid articles of arrangement set forth the rights,
privileges, restrictions and conditions (collectively the "Exchangeable Share
Provisions") attaching to the Exchangeable Shares;
AND WHEREAS the parties hereto desire to make appropriate provisions and to
establish a procedure whereby Applied will take certain actions and make certain
payments and deliveries necessary to ensure that the Corporation will be able to
make certain payments and to deliver or cause to be delivered shares of Applied
Common Stock in satisfaction of the obligations of the Corporation under the
Exchangeable Share Provisions with respect to the payment and satisfaction of
dividends, Liquidation Amounts, Retraction Prices and Redemption Prices all in
accordance with the Exchangeable Share Provisions;
NOW THEREFORE in consideration of the respective covenants in this
agreement and for other good and valuable consideration (the receipt and
sufficiency of which are hereby acknowledged), the parties agree as follows:
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ARTICLE I
DEFINITIONS AND INTERPRETATION
1.1 Defined Terms. Each term denoted herein by initial capital letters and not
otherwise defined herein shall have the meaning ascribed thereto in the
Exchangeable Share Provisions, unless the context requires otherwise.
1.2 Interpretation not Affected by Headings, etc. The division of this agreement
into articles, sections and paragraphs and the insertion of headings are for
convenience of reference only and shall not affect the construction or
interpretation of this agreement.
1.3 Number, Gender, etc. Words importing the singular number only shall include
the plural and vice versa. Words importing the use of any gender shall include
all genders.
1.4 Date for any Action. If any date on which any action is required to be taken
under this agreement is not a Business Day, such action shall be required to be
taken on the next succeeding Business Day.
ARTICLE II
COVENANTS OF APPLIED AND THE CORPORATION
2.1 Covenants of Applied Regarding Exchangeable Shares. So long as any
Exchangeable Shares are outstanding, Applied shall:
(a) not declare or pay any dividend on Applied Common Stock unless (i) the
Corporation shall have sufficient assets, funds and other property
(including, where applicable, shares of Applied Common Stock or other
securities of Applied) available to enable the due declaration and the
due and punctual payment in accordance with applicable law, of a
dividend on the Exchangeable Shares in accordance with the
Exchangeable Share Provisions and (ii) the Corporation shall
simultaneously declare or pay, as the case may be, a dividend on the
Exchangeable Shares in accordance with the Exchangeable Share
Provisions;
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(b) cause the Corporation to declare simultaneously with the declaration
of any dividend on shares of Applied Common Stock a dividend on the
Exchangeable Shares and, when such dividend is paid on Applied Common
Stock, cause the Corporation to pay simultaneously therewith such
dividend on the Exchangeable Shares, in each case in accordance with
the Exchangeable Share Provisions;
(c) advise the Corporation sufficiently in advance of the declaration by
Applied of any dividend on shares of Applied Common Stock and take all
such other actions as are necessary, in cooperation with the
Corporation, to ensure that the declaration date, record date and
payment date for any dividend on the Exchangeable Shares shall be the
same as the declaration date, record date, and payment date for the
corresponding dividend on shares of Applied Common Stock and such
dates in respect of dividends on the Exchangeable Shares shall be in
accordance with any requirement of the Exchangeable Share Provisions
and the stock exchange(s) on which the Exchangeable Shares may be
listed;
(d) ensure that the record date for any dividend declared on shares of
Applied Common Stock, Applied Common Stock Reorganization, Rights
Offering, Special Distribution or Capital Reorganization is not less
than 10 Business Days after the declaration date for such dividend or
effective date of such Applied Common Stock Reorganization, Rights
Offering, Special Distribution or Capital Reorganization;
(e) take all such actions and do all such things as are necessary or
desirable to enable and permit the Corporation, in accordance with
applicable law, to pay and otherwise perform its obligations with
respect to the satisfaction of the Liquidation Amount in respect of
each issued and outstanding Exchangeable Share upon the liquidation,
dissolution or winding-up of the Corporation, including without
limitation all such actions and all such things as are necessary or
desirable to enable and permit the Corporation to cause to be
delivered shares of Applied Common Stock to the holders of
Exchangeable Shares in satisfaction of the Liquidation Amount for each
such Exchangeable Share, in accordance with the provisions of Article
4 of the Exchangeable Share Provisions;
(f) take all such actions and do all such things as are necessary or
desirable to enable and permit the Corporation, in accordance with
applicable law, to pay and otherwise perform its obligations with
respect to the satisfaction of the Retraction Price and the Redemption
Price, including without limitation all such actions and all such
things as are necessary or desirable to enable and permit the
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Corporation to cause to be delivered shares of Applied Common Stock to
the holders of Exchangeable Shares, upon the retraction or redemption
of the Exchangeable Shares in accordance with the provisions of
Article 5 or Article 6 of the Exchangeable Share Provisions, as the
case may be;
(g) not exercise its vote as a shareholder of the Corporation to initiate,
consent to or approve the voluntary liquidation, dissolution or
winding-up of the Corporation nor take any action or omit to take any
action that is designed to result in the liquidation, dissolution or
winding-up of the Corporation; and
(h) not exercise its vote as a shareholder of the Corporation to authorize
the continuance or other transfer of the corporate existence of the
Corporation to any jurisdiction outside Canada.
2.2 Segregation of Funds. Applied will cause the Corporation to deposit a
sufficient amount of funds in a separate account and segregate a sufficient
amount of such assets and other property as is necessary to enable the
Corporation to pay or otherwise satisfy the applicable dividends, Liquidation
Amount, Retraction Price or Redemption Price, in each case for the benefit of
holders from time to time of the Exchangeable Shares, and will cause the
Corporation to use such funds, assets and other property so segregated
exclusively for the payment of dividends and the payment or other satisfaction
of the Liquidation Amount, the Retraction Price or the Redemption Price, as
applicable, in each case in accordance with the Exchangeable Share Provisions.
2.3 Reservation of Shares of Applied Common Stock. Applied hereby represents
and warrants that it has irrevocably reserved for issuance out of its authorized
and unissued capital stock such number of shares of Applied Common Stock as is
equal to the number of Exchangeable Shares outstanding immediately following the
Effective Date and covenants that at all times in the future while any
Exchangeable Shares are outstanding it will keep reserved and available, free
from pre-emptive and other rights, out of its authorized and unissued capital
stock such number of shares of Applied Common Stock (or other shares or
securities into which Applied Common Stock may be reclassified or changed) as is
necessary to enable Applied and the Corporation to perform their respective
obligations pursuant to this agreement, the Exchangeable Share Provisions and
the Voting and Exchange Trust Agreement.
2.4 Notification of Certain Events. In order to assist Applied to comply with
its obligations hereunder, the Corporation will give, or cause the Transfer
Agent to give, Applied notice of each of the following events at the time set
forth below:
(a) in the event of any determination by the Board of Directors of the
Corporation to institute voluntary liquidation, dissolution or winding
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up proceedings with respect to the Corporation or to effect any other
distribution of the assets of the Corporation among its shareholders
for the purpose of winding up its affairs at least 60 days prior to
the proposed effective date of such liquidation dissolution, winding
up or other distribution;
(b) immediately, upon the earlier of (i) receipt by the Corporation of
notice of, and (ii) the Corporation otherwise becoming aware of, any
threatened or instituted claim, suit, petition or other proceedings
with respect to the involuntary liquidation, dissolution or winding up
of the Corporation or to effect any other distribution of the assets
of the Corporation among its shareholders for the purpose of winding
up its affairs;
(c) immediately, upon receipt by the Transfer Agent of a Retraction
Request;
(d) at least 130 days prior to any accelerated automatic redemption date
determined by the Board of Directors of the Corporation in accordance
with the Exchangeable Share Provisions; and
(e) as soon as practicable upon the issuance by the Corporation of any
Exchangeable Shares or rights to acquire Exchangeable Shares.
2.5 Delivery of Applied Common Stock. In furtherance of its obligations under
subsections 2.1(e) and (f) hereof, upon notice of any event that requires the
Corporation to cause to be delivered Applied Common Stock to any holder of
Exchangeable Shares, Applied shall forthwith issue and deliver the requisite
shares of Applied Common Stock to or to the order of the former holder of the
surrendered Exchangeable Shares, as the Corporation shall direct. All such
shares of Applied Common Stock shall be duly issued as fully paid and
non-assessable and shall be free and clear of any liens. In consideration of the
issuance of each such shares of Applied Common Stock by Applied, the Corporation
shall issue to Applied, or as Applied shall direct, such number of common shares
of the Corporation as is equal to the fair value of such Applied Common Stock.
2.6 Qualification of Applied Common Stock. Applied shall use all reasonable
efforts to obtain and comply with all orders required from the applicable
Canadian securities authorities to permit the issuance of the Applied Common
Stock upon any such exchange of the Exchangeable Shares without registration or
qualification with or approval of or the filing of any document including any
prospectus or similar document or the taking of any proceeding with or the
obtaining of any order, ruling or consent from any governmental or regulatory
authority under any Canadian federal or provincial law or regulation or pursuant
to the rules and regulations of any regulatory authority or the fulfillment of
any other legal requirement before such Applied Common Stock may be issued by
Applied and delivered by the Corporation or Applied to the holder thereof or in
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order that such Applied Common Stock may be freely traded under the laws of
Canada and the United States thereafter (other than any restrictions on transfer
by reason of a holder being a "control person" of the Corporation or Applied for
purposes of Canadian federal or provincial securities law or an '"affiliate" for
purposes of United States Federal or state securities law).
2.7 Tender Offers, etc. In the event that a tender offer, share exchange offer,
issuer bid, take-over bid or similar transaction with respect to Applied Common
Stock (an "Offer") is proposed by Applied or is proposed to Applied or its
stockholders and is recommended by the Board of Directors of Applied, or is
otherwise effected or to be effected with the consent or approval of the Board
of Directors of Applied, Applied will use all commercially reasonable efforts
expeditiously and in good faith to take all such actions and do all such things
as are necessary or desirable to enable and permit holders of Exchangeable
Shares to participate in such Offer to the same extent and on an economically
equivalent basis as the holders of Applied Common Stock, without discrimination.
Without limiting the generality of the foregoing, Applied will use all
commercially reasonable efforts expeditiously and in good faith to ensure that
holders of Exchangeable Shares may participate in all such Offers without being
required to retract Exchangeable Shares as against the Corporation (or, if so
required, to ensure that any such retraction shall be effective only upon, and
shall be conditional upon, the closing of the Offer and only to the extent
necessary to tender or deposit to the Offer).
2.8 Ownership of Outstanding Shares. Applied covenants and agrees in favour of
the Corporation that, as long as any outstanding Exchangeable Shares are owned
by any person or entity other than Applied or any of its Affiliates, Applied
will be and remain the direct or indirect beneficial owner of all issued and
outstanding shares in the capital of the Corporation (other than Exchangeable
Shares) and all outstanding securities of the Corporation carrying or otherwise
entitled to voting rights in any circumstances (other than Exchangeable Shares),
unless Applied shall have obtained the prior approval of the Corporation and the
holders of the Exchangeable Shares given in accordance with section 9.2 of the
Exchangeable Share Provisions.
2.9 Applied Not To Vote Exchangeable Shares. Applied covenants and agrees that
it will appoint and cause to be appointed proxyholders with respect to all
Exchangeable Shares held by Applied and its Affiliates for the sole purpose of
attending each meeting of holders of Exchangeable Shares in order to be counted
as part of the quorum for each such meeting. Applied further covenants and
agrees that it will not, and will cause its Affiliates not to, exercise any
voting rights that may be exercisable by holders of Exchangeable Shares from
time to time pursuant to the Exchangeable Share Provisions or pursuant to the
provisions of the OBCA with respect to any Exchangeable Shares held by it or by
its Affiliates in respect of any matter considered at any meeting of holders of
Exchangeable Shares, including without limitation any approval to be given by
holders of Exchangeable Shares pursuant to section 9.2 of the Exchangeable Share
Provision.
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2.10 Due Performance. On and after the Effective Date, Applied shall duly and
timely perform all of its obligations provided for in the Plan of Arrangement,
including any obligations that may arise upon the exercise of Applied's rights
under the Exchangeable Share Provisions.
2.11 Economic Equivalence. Applied hereby acknowledges that it will be bound by
any determination of economic equivalence made by the Board of Directors of the
Corporation pursuant to section 10.1 of the Exchangeable Share Provisions, where
applicable.
ARTICLE III
GENERAL
3.1 Term. This agreement shall come into force and be effective as of the date
hereof and shall terminate and be of no further force and effect at such time as
there are no Exchangeable Shares (or securities or rights convertible into or
exchangeable for or carrying rights to acquire Exchangeable Shares) held by any
party other than Applied and its Affiliates.
3.2 Changes in Capital of Applied and the Corporation. Notwithstanding the
provisions of section 3.4 hereof, at all times after the occurrence of any event
effected pursuant to section 2.7 hereof as a result of which either shares of
Applied Common Stock or the Exchangeable Shares or both are in any way changed,
this agreement shall forthwith be amended and modified as necessary in order
that it shall apply with full force and effect, mutatis mutandis, to all new
securities into which shares of Applied Common Stock or the Exchangeable Shares
or both are so changed and the parties hereto shall execute and deliver an
agreement in writing giving effect to and evidencing such necessary amendments
and modifications.
3.3 Severability. If any provision of this agreement is held to be invalid,
illegal or unenforceable, the validity, legality or enforceability of the
remainder of this agreement shall not in any way be affected or impaired thereby
and this agreement shall be carried out as nearly as possible in accordance with
its original terms and conditions.
3.4 Amendments, Modifications, etc. This agreement may not be amended or
modified except by an agreement in writing executed by the Corporation and
Applied and approved by the holders of the Exchangeable Shares in accordance
with section 11.2 of the Exchangeable Share Provisions.
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3.5 Ministerial Amendments. Notwithstanding the provisions of section 3.4, the
parties to this agreement may without the approval of the holders of the
Exchangeable Shares, at any time and from time to time, amend or modify this
agreement in writing for the purposes of:
(a) adding to the covenants of either or both parties for the protection
of the holders of the Exchangeable Shares;
(b) making such amendments or modifications not inconsistent with this
agreement as may be necessary or desirable with respect to matters or
questions which, in the opinion of the Board of Directors of each of
the Corporation and Applied, it may be expedient to make, provided
that each such board of directors shall be of the opinion that such
amendments or modifications will not be prejudicial to the interests
of the holders of the Exchangeable Shares; or
(c) making such changes or corrections which, on the advice of counsel to
the Corporation and Applied, are required for the purpose of curing or
correcting any ambiguity or defect or inconsistent provision or
clerical omission or mistake or manifest error herein, provided that
the boards of directors of each of the Corporation and Applied shall
be of the opinion that such changes or corrections will not be
prejudicial to the interests of the holders of the Exchangeable
Shares.
3.6 Meeting to Consider Amendments. The Corporation, at the request of
Applied, shall call a meeting or meetings of the holders of the Exchangeable
Shares for the purpose of considering any proposed amendment or modification
requiring approval pursuant to section 3.4 hereof. Any such meeting or meetings
shall be called and held in accordance with the by-laws of the Corporation and
the Exchangeable Share Provisions and applicable law.
3.7 Waivers Only in Writing. No waiver of any of the provisions of this
agreement otherwise permitted hereunder shall be effective unless made in
writing and signed by both of the parties hereto.
3.8 Enurement. This agreement shall be binding upon and enure to the benefit
of the parties hereto and their respective successors and permitted assigns.
3.9 Applied Successors. Applied shall not enter into any transaction (whether
by way of reconstruction, reorganization, consolidation, merger, transfer, sale,
lease or otherwise) whereby all or substantially all its undertaking, property
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and assets would become the property of any other person or in the case of a
merger, of the continuing corporation resulting therefrom, unless:
(a) such other person or continuing corporation is a corporation (the
"Applied Successor") incorporated under the laws of any state of the
United States or the laws of Canada or any province thereof; and
(b) the Applied Successor, by operation of law, becomes, without more,
bound by the terms and provisions of this agreement or, if not so
bound, executes, prior to or contemporaneously with the consummation
of such transaction, an agreement to be bound by the provisions hereof
as if it were an original party hereto and to observe and perform all
of the covenants and obligations of Applied pursuant to this
agreement, in form satisfactory to the Corporation, acting reasonably.
Nothing herein shall be construed as preventing the amalgamation or merger of
any wholly-owned subsidiary of Applied with or into Applied.
3.10 Notices to Parties. All notices and other communications between the
parties shall be in writing and shall be deemed to have been given if delivered
personally or by confirmed telecopy to the parties at the following addresses
(or at such other address for either such party as shall be specified in like
notice):
(a) if to Applied at:
000 Xxxx Xxx, Xxxxx 000
Xxxx Xxxxx, Xxxxxxx 00000 X.X.X.
Attention: Xxxxxxx X. Xxxxxxxx
Fax: (000) 000-0000
(b) if to the Corporation at:
000 Xxxxxxxx Xxxxxx Xxxx
Xxxxx 0000
Xxxxxxx, Xxxxxxx X0X 0X0
Attention: Xxxxxx Xxxxx
Fax: (000) 000-0000
Any notice or other communication given personally shall be deemed to have been
given and received upon delivery thereof and if given by telecopy shall be
deemed to have been given and received on the date of confirmed receipt thereof
unless such day is not a Business Day in which case it shall be deemed to have
been given and received upon the immediately following Business Day.
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3.11 Counterparts. This agreement may be executed in counterparts, each of
which shall be deemed an original, and all of which taken together shall
constitute one and the same instrument.
3.12 Jurisdiction. This agreement shall be construed and enforced in
accordance with the laws of the Province of Ontario and the laws of Canada
applicable therein.
3.13 Attornment. Applied agrees that any action or proceeding arising out of
or relating to this agreement may be instituted in the courts of Ontario, waives
any objection which it may have now or hereafter to the venue of any such action
or proceeding, irrevocably submits to the jurisdiction of the said courts in any
such action or proceeding, agrees to be bound by any judgment of the said courts
and not to seek, and hereby waives, any review of the merits of any such
judgment by the courts of any other jurisdiction and hereby appoints the
Corporation at its registered office as Applied's attorney for service of
process.
IN WITNESS WHEREOF, the parties hereto have caused this agreement to be
duly executed as of the date first above written.
APPLIED CELLULAR TECHNOLOGY, INC.
By: /s/ Xxxxxxx X. Xxxxxxxx
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By: /s/ DA Swift
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